Crown accounts show strong economic fundamentals

New Zealand’s solid economic fundamentals are showing through in the Government’s monthly accounts, Finance Minister Grant Robertson says.

Stronger-than-forecast wage and employment growth, and higher company profits are shown in the figures for the eleven months to 31 May.

The Treasury today reported PAYE income came in above forecast, suggesting wage and employment growth has been stronger than expected in the May Budget. Corporate tax was also above forecast, suggesting higher corporate profits. Higher GST indicated stronger-than expected residential investment.

“This fits with a near-record low unemployment rate and New Zealand having one of the highest employment rates in the OECD, strength in the monthly trade figures and strong building consent data,” Grant Robertson said.

Last week, the GDP figures showed growth was steady at 0.6% in the March quarter, and that New Zealand’s annual growth was higher than in Australia, the UK, Canada, the EU and Japan.

The OECD yesterday said New Zealand has solid growth rates, along with low inflation and high employment.

“Add record low interest rates into the mix, and the underlying domestic economic environment in New Zealand is strong. The Government is running a surplus, and keeping debt under control, while the economy grows faster than our international peers,” Grant Robertson said.

As with last month’s accounts, the Treasury has advised some caution needs to be taken when assessing some of the headline Crown account numbers and elements of the tax take, due to timing differences.

IR started using a new system for recording revenue from the start of the tax year on 1 April. This has likely ‘brought forward’ the recognition of some tax revenue like ‘other persons’ and some corporate revenue compared to when the Treasury expected it to be recorded.

The surplus at 31 May was $6.96 billion, which was $2.49 billion higher than forecast in the Budget. This was influenced by tax revenue coming in $2.17 billion above forecast in the eleven months to May. A higher surplus means a lower net debt reading. Net core Crown debt was 19.3% of GDP at 31 May.

“We will know more when the Crown’s final accounts for the year to 30 June are released in October and the Half Year Update is released in December, meaning any calls to use what appears on paper to be a higher surplus would be premature,” Grant Robertson said.